Today, the Manhattan Institute awards its Hayek prize to Matt Ridley, author of The Rational Optimist. A shortened version of his speech appears in the Wall Street Journal. He makes the point that what is called the crowd-sourced cloud has always been a feature of trade and rising prosperity, and uses Hayek’s theory of knowledge as the basis for explaining how this is so. One person alone cannot create much of anything but by coming together through the division of labor, we can combined the knowledge that is dispersed among many people to create things that otherwise could not have existed. The coming together he is happy to call the cloud and these cooperative trading relationships he is pleased to call crowd sourcing. So these are not just features of the digital world, he argues, but are intrinsic to all market behavior. Crucial in the process are institutions such as property rights, contractual conventions, and pricing signals that work like light switches in what would otherwise be dark corridors. These institutions enable people to have points of contact and leverage their limited knowledge to achieve new kinds of production that is far more complex than they could achieve as individuals.
This is a very nice way of looking at the issue. These kinds of descriptions conjure up in my own mind a scene from a Busby Berkeley film of the 1930s, where dancers from all directions come together in a beautiful and orderly way. The camera then moves overhead to give a picture of the result, which is always an amazing and moving shape that no single dancer can see on her own. The dancer only continues to dance the part, knowing intellectually that she is part of some larger but always unaware of the final picture that is being formed. Everyone is essential. No one can make the shape alone. This is perhaps a weak analogy — the Berkeley productions are carefully planned and scripted but the Hayekian process is spontaneous and ordered only by conventions and institutions — but it roughly accords with what I draw from the picture of market operations that Ridley and by extension Hayek describe.
Reading this article, however, makes me wonder why there is such an intense focus on dispersed knowledge, relative individual ignorance, unconscious planning, and all of the persistent limits on the ability of individuals to intellectually conceive of the results of their actions. Ever since Kinsella/Boldrine/Levine and others have started to emphasis the role of learning from others in the market process — in the context of observing how IP regulations prohibits acting on leaning — I’ve culled through Hayek’s work to find his own take on the situation. But rather than finding discussions on how individuals learn from each other, how they draw on successful behaviors and replicate them, I keep finding that Hayek returns again and again to his focus on ignorance and the pervasive lack of knowledge of market participants. The “learning” that takes place within his description doesn’t seem to be individual learning but rather a kind of social learning that is on display only in the results. He seems far less interested in questions such as: how to individuals acquire more knowledge than they bring to the table, what do people do with new knowledge, how do people sort through information that hits them from every direction to put together a successful plan for action, and how do individuals respond to results that they can see from their own actions based on new knowledge?
We find these kinds of issues addressed by Mises when he speaks of recipes and free goods and the learning that takes place in the face of profitable market behaviors. Rothbard writes of the technological idea that is gained from market experience. They both seem to addressed this point about how individuals gain knowledge and do not just persist in ignorance. They are both interested in how market competition selects through good judgements and bad judgements to make sure that the best judgements prevail. The market makes us all behavior more rationally by giving us new information we can really use in practical affairs. Hayek’s main concern seems to be the opposite: how individual ignorance persists even in the face of group learning. It’s as if he seemed to think that people never quite leave that state of blindness. Yet surely in real markets, ever-progressing larning is the major feature. We get ever better at what we do.
I know that I’m drawing with a broad brush here, and if I’m wrong about this, I would love to see where Hayek actually does take up this subject, not just explaining how little we know but also explaining how we know what we do know and how we could about improving what we know by connection with others. I’m thinking in particular about some wonderful passages in Higgs’s book on the Gilded Age. He shows that the population movement from the country to the city generated a wonderful advantage of allowing people better access to communication and the sharing of technique and experience. Merchants could better learn from each other and apply what they learned in a completely rational and enlightened way. This opportunity had a great effect on economic growth, Higgs shows. In other words, the benefit of crowd sourcing in the cloud here is not just overcoming persistent ignorance through institutional cooperation but the opportunity to actively become less ignorant and to learn new skills, new techniques, and become better market players as individuals. If this theme appears in Hayek’s writings, I would be very much interested to know where. I get the point that people do not know enough to design a social order; I would like to see Hayek’s discussion of how the social order also improves what people do know so that people become more informed and rational actors by virtue of the new knowledge that the cloud provides them.
Any hints on where to look?